Murdoch Folds ’Em; Prepares for Inquisition

During his long career as the pantomime villain of the media world, Rupert Murdoch has seen out many scandals, but nothing like this one. Back in 1983, under attack for his decision to publish a set of diaries from Adolf Hitler that turned out to be forged*, he famously remarked, “After all, we are in the entertainment business.” Today, nobody, least of all Murdoch, is laughing.

The BSkyB announcement marks a humiliating climb down for Murdoch. At this stage, however, he has more important issues to deal with—namely, insuring the survival of himself and his family at the helm of his beloved News Corporation. In the midst of a media frenzy, it is always dangerous to make definitive judgments, but at the moment it is hard to see how Murdoch can ever fully recover from the blows he has suffered in the last few days.

Failing in his designs for BSkyB was the least of it. To all intents and purposes, the media company, whose satellite dishes protrude from the roofs of ten million British homes, is already part of the Murdoch empire. News Corp. owns thirty-nine per cent of BSkyB’s shares, and Murdoch picks its boss. From 2003 until 2007, his youngest son, James Murdoch, was BSkyB’s C.E.O. Since then, Murdoch, Jr., who now runs all of News Corp.’s operations in Europe and Asia, has held the post of non-executive chairman of BSkyB, a post he will continue to hold, the company said today.

The motivation for the takeover bid was purely financial. Having spent more than twenty years building up BSkyB—which was loathed on the left when it was launched, but which has since established itself as part of the fabric of British life—Murdoch is understandably keen to consolidate the business with the rest of News Corp., thereby gaining access to a hundred per cent of its cash flow. But now that the takeover bid has failed, nothing much has changed. News Corp. remains a formidable company with profitable businesses all over the world. After today’s announcement, its stock price actually rose.

The question marks hang over the Murdochs, not News Corp. In the coming months, both Rupert and James will be called before a British judge to explain what they knew about phone hacking and when. The judicial inquiry that David Cameron, the British Prime Minister, announced today will be modelled on the 2003 Hutton Inquiry into the circumstances surrounding the death of David Kelly, the British weapons scientist who had expressed skepticism about government claims that Saddam Hussein had weapons of mass destruction. The evidence that Lord Hutton unearthed, about which I wrote a long article for the magazine, effectively destroyed Tony Blair’s reputation.

Lord Justice Leveson will want to know not only about the phone hacking itself, much of which took place five or ten years ago, but about News Corporation’s 2007 internal inquiry, which purported to establish that the misdeeds were the work on one “rogue reporter.” From the outside, only two possibilities present themselves. The inquiry was horribly botched, or there was a deliberate coverup.

Leveson, a Liverpudlian with a reputation for independence, is also sure to take an interest in what happened subsequently. News International, the News Corp. subsidiary that runs the British newspapers, reached legal settlements with a number of phone-hacking victims, effectively buying their silence. James Murdoch, it is now known, explicitly approved some of these payments.

Scotland Yard, meanwhile, will be continuing its investigation into allegations that journalists from the Murdoch newspapers bribed police officers to obtain information about celebrities, the royals, and others. Bribery is a serious charge which carries long prison sentences. Who authorized these payments? Who else knew about them? From 1995 to 2007, the head of News International was Les Hinton, a longtime Murdoch aide who is now chief executive of Dow Jones. In 2009, Rebekah Brooks, who previously edited the Sun, took over as head of News International, a post she still holds, despite calls from all sides for her resignation.

Then there is the U.S. angle, such as it is. Yesterday, Senator Jay Rockefeller, who heads the Senate Commerce Committee, called on the American authorities to determine whether phone hackers tied to News International had targeted U.S. individuals. “I am concerned that the admitted phone hacking in London by the News Corp. may have extended to 9/11 victims or other Americans. If they did, the consequences will be severe,” Rockefeller said in a statement.

In short, the Murdochs and News Corp. are going to be besieged for months and years to come. What now are the chances of James Murdoch, or any of his siblings, taking over from his father as chairman and chief executive of News Corp.? The odds are a lot longer than they were this time last week.

It should be recalled that Murdoch and his editors weren’t the only ones to fall for Konrad Kujau’s handiwork: Hugh Trevor-Roper, the late Oxford historian, pronounced it genuine; Stern and Newsweek both published extracts.